TaxTMI 
TaxTMI 
2018 (12) TMI 1905
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.... section 14A read with Rule 8D of the Income Tax rules, 1962 (hereinafter the 'Rules'). For this assessee has raised the following ground No.1: - "1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income-tax (Appeals), Mumbai [CIT(A)'] has erred in continuing disallowance of Rs. 2.36.61.204 made by the Assessing Officer ('AO') under section 14A of the Income tax Act, 1961 (MV) white computing profits under normal provisions of the Act as well as computing book profits under section 115JB of the Act. 3. Briefly stated facts relating to the above issue are that the assessee company has received dividend income of Rs. 26.70 lakhs. The AO noticed from the accounts of the assessee that no disallowance has been attributed by the assessee of any expenses relatable to exempt income and hence, issue show cause notice as to why the disallowance under section 14A of the Act read with Rule 8D of the Rule should not be made. The assessee file reply to the show cause notice of AO but he was not convinced and he simply invoked the provisions of section 14A of the Act read with Rule 8D of the rules and made of disallowance under Rul....
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....and as there is no finding by the AO that any expense specifically incurred for earning exempt income, no disallowance could have been made under section 14A of the Act. For attracting the provisions of section 14A there should be a proximate cause for disallowance which is absent in the assessee's case. The assessee claims that no expenditure was specifically incurred for earning the exempt income and the AO has not brought on record any finding to refute the same. The above stated facts are also not controverted by the learned CIT DR. 6. After hearing both the sides, we have gone through the assessment order and noted that the AO has simply invoked the provisions of section 14A of the Act read with Rule 8D(2)(ii). Even there is no whisper that how the administrative expenses are linked to these exempt incomes. We find that this issue is squarely covered in favour of assessee and against the Revenue by the decision of Hon'ble Supreme Court in the case of Maxopp Investment Ltd. (supra), wherein Supreme Court held as under: - "41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the the....
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....accordance with Rule 10 C i.e. CUP Method. However, the AO accepted the CUP method but applied the rate at 3% and made addition of Rs. 97,51,164/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) confirmed the action of the AO after considering the submissions of the assessee and by following the co-ordinate Bench of ITAT, Mumbai in the case of CIT vs. Everest Kento Cylinder Ltd. [2015] 378 ITR 57 (Bombay) by observing as under: - "It can be seen from the explanation (i) (c) of the section 92B of the Act that the 'guarantee' is an international transaction. After insertion by the Finance Act, 2012, with retrospective effect from 01.04.2002, there remains no dispute that the "guarantee" is an international transaction. Further, Hon'ble ITAT Mumbai in the case of Everest Kanto Cylinder Ltd. vs. DCIT (2013) 34 taxmann.com 19 while dealing with a similar objection raised, have held in this regard under: "21. So far as the learned Senior Counsel's contention that guarantee commission is not an international transaction and there could not be any method for evaluating the ALP for the guarantee commission. we do not find any merit in the said c....
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....) has upheld the guarantee commission at 0.5%, which is already declared by assessee while bench marked the commission rate for workout ALP. Hon'ble Bombay High Court in Everest Kento Cylinder Ltd. (supra) held as under: - "10. Having considered submissions of Mr. Malhotra for the revenue and Mr. Pardiwalla for the assessee, we are of the view that the order of the Tribunal as regards disallowance under section 14A and restricting the same to Rs. 1 lac was justified in view of the material before the Tribunal. Furthermore, having considered the fact that a sum of Rs. 4,47,649/- was not conceded in the return but was adhoc acceptance during the course of assessment, the assessee could not be bound by it. The Tribunal as the second fact finding authority had gone into factual aspects in great detail and therefore having interpreted the law as it stood on the relevant date the order passed cannot be faulted. In the matter of guarantee commission, the adjustment made by the TPO were based on instances restricted to the commercial banks providing guarantees and did not contemplate the issue of a Corporate Guarantee. No doubt these are contracts of guarantee, however, when they ....